OFT calls for improvements in public-sector ICT procurement

The Office of Fair Trading (OFT) has called for changes in public-sector IT procurement to encourage more competition for contracts.

The OFT undertook a market investigation that looked at competition between companies in two key areas that account for about 50 per cent of UK public-sector ICT expenditure - commercial off-the-shelf software and outsourced IT.

It found that there were barriers preventing companies from entering the market or expanding their share of supply and barriers deterring buyers from switching between suppliers.

It said that these include: overly complex procurement practices that mean responding to tenders can be time-consuming and expensive; prohibitively costly and time-consuming processes for gaining security clearances to carry out public-sector ICT work; and an inherent advantage held by some incumbent suppliers that can lead to significant switching costs.

An example of this, it said, was that the incumbent may provide bespoke products that large numbers of staff are trained to use - leading to significant costs and disruption if the public-sector department changed its supplier.

The OFT said that these barriers were compounded further by the fact that public-sector buyers lacked the requisite information to judge whether a proposed ICT product or service was the most efficient or best value solution.

There is also a lack of data collection by the public sector, it said, which makes it difficult for public-sector buyers to evaluate the performance of their incumbent suppliers, or to decide whether switching would make more sense.

The OFT went on to claim that the sector lacks sufficient in-house commercial and technical expertise that could help it to better understand and manage large and complex ICT contracts more effectively. It said that ICT suppliers tend to know more than public-sector buyers about ICT goods and services, which has led to an imbalance that can be seen in suppliers' complex pricing and lack of transparency.

The report did commend public-sector buyers for starting to change the way they procure ICT - by splitting up large contracts into "towers", for example. However, it recommends that the sector should work with suppliers to "ensure comprehensive, consistent and objective data is collected efficiently about products, prices and supplier performance".

It adds that IT suppliers should in turn also do more to improve understanding by clearly informing public-sector buyers.

"The market supplying ICT products and services to the public sector is worth around £14bn and is not working as well as it should," said Rachel Merelie, project lead at the OFT.

Phil Dawson, CEO of Skyscape Cloud Services, said he agreed with much of the OFTs report but lamented the lack of comment or investigation with regards to the G-Cloud programme, which he believes has a clear focus on competition.

His recommendation for change within the public sector was to educate the buyers.

"There is certainly more to be done to educate the public-sector market around the benefits that can be realised with innovative IT services," he said.

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